Saturday, January 30, 2010

Ecobuild, advertised as the world's biggest event for sustainable design, construction and development, is at Earl's Court, London on 2nd, 3rd and 4th March.

There are to be over 1000 exhibitors and hundreds of conference and seminar sessions on all sorts of building, design and construction topics. Anyone with an interest in how to refurbish your property in a way that does not damage the environment will find what they need at this event. Sheepwool insulation, bat conservation, living walls, eco kitchens all on display.

Tickets and access to all of the seminars is free. Register for tickets and see all the details here.

Reports in the FT indicate that private banks are beginning to lend again to landlords.

Banks such as Standard Chartered Bank, Investec, JP Morgan are among the boutique banks that have indicated their intention to start lending to wealthy private clients who are keen to expand their buy-to-let investment portfolios in the current depressed market.

Each bank has their own criteria on lending and they will only lend to the 'seriously wealthy'.

One such private bank is the First Bank of Nigeria which will lend between £2.5 m and £25 m on London properties advancing up to 60% LTV at a rate of around 4%.

Friday, January 29, 2010

I've recently come back from looking at two rental properties that are shortly going to auction. Both are highly cash generative with prospective net yields of near 10%.

What it reminded me of is that landlords looking at property to invest need to be clear about their objectives for their properties before taking the plunge. Are you looking to:

1. Buy for income and maximum yield?

2. Speculation on long term capital growth?

3. Looking to add value through improvement or development?

Before you start looking make sure that you are clear what your primary objective is. There may be secondary reasons but landlords should know from the outset what their primary driver is for property investment.

Have a look at the feature on cashcows and trophy assets. Looking at the recent Halifax research on house price booms we look as if in this decade of the terrible / turbulent / traumatic TENS then buying for capital growth alone may not be such a good call. In my view we are likely to be entering a decade where highly income generating buy-to-let investments perform best

One bit of good news is that the new powers should only apply to those properties that are converted to multi-occupancy in future and will not be retrospective.

The policy seems to smack of a desperate Government releasing vote worthy policy just prior to an election, unfortunately landlords will be forced to take the fallout. But as we all know the electorate don't like landlords so we are an easy political target, get ready for the war on landlords .

The changes aim to stop those landlords who had moved away from larger properties that needed a HMO licence to avoid the regulations and cost of a licence, to smaller properties that fell outside regulations.

The Government seems to be ambivalent to the realities of market forces and could find itself with an increasing shortage of affordable accommodation as regulations become more restrictive.

Many of this category of rental property was used as student accommodation and could add to the financial burden of the ever increasing debt ridden student population, forcing more and more to study at home towns and cities to save on costs.

But we shouldn't worry the Government have a massive building program of council and affordable housing to meet the property shortage crisis over the coming years, sorry, news just in, they haven't. Oh dear!

After years of treading softly, pretending to not want to legislate against landlords. Pretending to want to work with us to provide a better private rental sector they have finally shown their true colours. Just like every Labour administration since the war.

They don't like landlords and want to beat us into submission with legislation. Why? Because it's good for us! Because it's good for communities, society, tenants. No! What it's really about is the fact that they can say to the electorate that they are doing something and hope to snatch the odd vote from poorly informed tenants and Labour supporters who love to see landlords get a good kicking!

HMO properties to require planning permission

The latest announcement is that the government have decided to require every landlord that wants to let a property to 3 or more unrelated tenants to apply for planning permission. For a change of use from a single dwelling to a HMO property requiring an application that will cost a minimum of £335, that before adding in the potential fees for employing an agent. This is simply outrageous; a tax on landlords. The legislation in unenforceable and will lead to huge uncertainty to landlords looking to buy property and rent out to multiple tenants. What do you do buy a property and then hope to get planning permission or make the purchase conditional on permission being granted. How many landlords and investors will now be put off buying property and providing much needed rental accommodation?

Extension of HMO licensing powers

Not only is the government bringing in new planning controls on HMO properties but they also want to increase the powers given to local authorities to require landlords to obtain licenses for HMO properties in certain designated areas. So called licensing through the back door.

Landlord licence

Finally, the third part of the attack on landlords is the Housing and Planning Minister John Healey's reiteration of the Government's intention to bring in a mandatory licence for all landlords. A useless bit of paper, an attack on a fundamental right of property ownership and a tax on being a landlord and letting property.

Landlord Associations deluding themselves

We have seen and heard from the various landlord associations the NLA and RLA about their work lobbying Ministers 'behind the scenes'. Persuading and influencing. Rubbish! They may be well intentioned but they delude themselves as the latest developments prove. You will never make this leopard change their spots. Labour don't like landlords! Fundamentally they don't understand the concept of the little man, working hard, saving and investing and providing for their future. We should all be part of some big corporate machine, controlled, ordered, beholden to the Government.

In yesterdays announcement, the government drew up the battle lines on it's war on landlords.

The move last week by the Skipton last week to raise it's standard variable rate (SVR) on mortgages from 3.5% to 4.95% for new borrowers is a worrying precedent and shows how much pressure many building societies accounts are under. Building societies that lend their savers funds are struggling to draw in adequate savings as low interest rates and aggressive saving schemes from nationalised banks threaten their traditonal saving base.

The move by Skipton has been matched this week by specialist buy-to-let lenders such as the Nationwide who announced plans to raise SVR across their specialist lending divisions including the Mortgage Works which is now one of the largest buy-to-let lenders.

Thousands of landlords will see their SVR jump by up to 0.3% from February 1st adding to the cost of their buy-to-let loans.

A spokesperson for Nationwide, which is the UK's biggest building society, said:

“Particularly in the specialist marketplace, the rates for specialist products tend to be higher than prime, and there has been more movement in that area.

“It is a symptom of the market that we are having to review these rates. Other lenders have also done this and we feel this is an appropriate action to take.”

I recently drew landlords to the opportunities available of investing in buy-to-let through a buy-to-let fund.

It appears that the recovery in the housing market has caused one fund to abandon it's plans to float.

Property developers the Candy brothers have cancelled plans to create and float a London residential property fund after sharp value rises took away the chance for opportunistic buying.

Nick and Christian Candy had wanted to raise 50 million pounds of equity, building a fund worth 100 million pounds including debt. Smith & Williamson, which was working with the Candys, confirmed that it had stopped pre-marketing of the Candy & Candy Growth Fund.

Tuesday, January 26, 2010

2009 was the year of the 'reluctant landlord', will 2010 be the year of the 'reluctant tenant'?

The UK property market is seeing an increased trend of 'reluctant tenants' following a shift in supply and demand for properties, according to new research from ARLA.

The excess of rental property is reducing, while demand for properties rise, the research from the Association of Residential Letting Agents (ARLA) took feedback from UK letting agents and landlords.

The research identifies the 'reluctant tenant' as often a previous homeowner who was forced to sell their home during the last year either due to financial instability or a job-move and are now struggling to find the right property, due to a shortage of both properties for sale and realistic mortgage options.

The Staffordshire Railway BS has just increased the loan to value available on it's buy-to-let loans from 50% to 60%.

The pay rate on this buy-to-let loan is 4.5% and the buy-to-let mortgage is available direct from the lender with no administration charge. Ideal for a landlord looking for no fee no nonsense buy-to-let loan from an old school lender.

Rightmove has claimed that confidence is pouring back into the UK housing market. Their latest survey reveals that 53% of respondents expect a price rise in the UK housing market compared to just 10% last year.

The one thing that any market needs for recovery is confidence so these figures are a positive sign. If buyers believe prices will go up and they expect to pay more........then surprisingly sellers are more than willing to put them up to oblige.

However, these same buyers could be the ones that will ultimately see their wages cut, lose their job as a result of the likely belt tightening exercises the new government will demand in order to get to grips with our huge budget deficit. After this cold blast of reality then maybe buyers will be less confident and Rightmove like all estate agents will find it harder to talk the market up. This is certainly the view of former Moneyweek editor Merryn Somerset Webb in the FT.Landlord insurance - professional rate - instant quotes

The Tenancy Deposit Scheme is all set to increase its fees to letting agents. It is set to increase the minimum fee to £750 for 2010/11, which is an increase of 29% from the previous rate of £583.

The Tenancy Deposit Scheme are arguing the the new fee structure "is fairer to charge by tenancy and not office in view of the disproportionate number of disputes being referred by some agents while others are not referring any at all."

However, The Negotiator magazine reports that a large number of lettings agents are struggling to see anything fair about the proposed new charging structure.

House prices have risen by 273% over 5o years according to research produced by the Halifax.

Anybody who has bought a buy-to-let property at the start of the nineties will probably not been surprised by this. The 'naughties' infact were the top performing decade over the last 50 years with prices showing a real or inflation adjusted growth rate of 5%. This compares to 2.7% over the entire 50 years.

What these figure do indicate that growth has not been even. For instance the decade previous between 89 and 99 house prices actually fell by 2.4% in real terms. Could it be that on ten year cycles we have a weak decade followed by a strong decade? I suspect that this may be the case particularly when you factor in the actions of politicians and policy makers who are looking to reign in the banks. This will inevitably have a knock on impact on their ability to lend.

Will landords be disappointed in the coming decade?

Therefore those landlords looking to repeat the growth rates in the value of their investment may be disappointed in the coming decade.

Historically the periods of the strongest growth were shown in the following periods:

These are the years 1971-73, 1977-1980, 1985-89 and the most pronounced of all, that between 1998 and 2007.

Each of these four periods of sharp rises in house prices in real terms was followed by a period of significant falls, and the most recent decade has been no exception to that pattern.

The only positive is that here in the crowded UK with our green belts and restrictive planning policies is that our growth rate in house prices has been greater than those of our continental cousins according to the Barker Review.

Sunday, January 24, 2010

I'm a self confessed agnostic but I know that there are an increasing number of Muslim landlords that follow this buy-to-let blog and may be interested in where to obtain a shariah compliant buy-to-let mortgage. I don't confess to be an expert but here are 5 providers I know of. You may no more if so feel free to post their details below:

Saturday, January 23, 2010

Cordea Savills, the funds arm of property services firm Savills said on Friday it has launched the UK Income and Growth Fund to acquire prime assets in Britain's recovering commercial property market.

The open-ended fund had its first close at end-Dec 2009, raising 70 million pounds from three investors including Aviva Investors , a global multi-manager and a European pension fund, it said in a statement.

The fund is targeting to raise a total of 1 billion pounds over the next few years, and plans to deliver distributions to investors of over 5 percent, fund director George Tindley said.

Friday, January 22, 2010

Predicted growth for the UK sales market in 2010, is 3-5%. Prime London properties will continue to lead the way and remain the hub of growth. Despite this affirmation for UK sales, there are still large concerns which could halt progress such as the expected increase in interest rates. Furthermore, the anxiety around the election and possible taxation later on in the year could potentially have unseen impact on the market.

One factor which has influenced the predicted growth is the consistent imbalance of supply and demand. As we progress through 2010, this is likely to remain, although as vendors become aware that that they can achieve a profitable and quick sale, there is likely to be uplift in UK property sales stock.

Buyer numbers are predicted to return to 2007/8 levels. This is based on the key drivers that helped fuelled the market in 2009; where properties for rent enjoyed lower interest rates, greater economic stability and a weak pound.

Although early in 2009, there were drops in the UK house prices, there was an apparent change in Q2. It has been suggested that the 4.3% increase in house prices started the upward theme. In addition, whilst monthly fluctuations have been moderate, according to the Land Registry, the steady increase has been consistent since May 2009.

With regards to the rental market, it will experience a sluggish start in 2010 and overall there is little growth predicted. However, the market will be less erratic than 2009. The previous 18 months have been a challenging time for landlords, but as the market stabilises, those who have managed to remain steadfast against the economical storm will start to experience the benefits.

Once such benefit is that as the economy starts to recover, we should see a positive impact on the corporate rental market. Businesses will re-gain confidence and start to re-locate staff and re-invest in their organisations. Although it is to be expected that these companies will be prudent with their reduced budgets and therefore have lower relocation packages on offer.

Even though we have seen an improvement in the economy, consumer confidence remains fragile, and although applicant levels remain buoyant we are not yet seeing applicants increase their budgets. In reality, it is taking some tenants longer to find suitable accommodation due to their tight budgets.

Undoubtedly the sales market has a huge impact on lettings. In 2009, we saw accidental landlords returning with properties for sale to the market and therefore bringing rental stock levels down. If the sales market continues to strengthen, this impact is likely to continue into 2010. If stock levels remain consistently low a slight increase in rents could occur. Although this will not be until demand traditionally increases (Q2 and beyond) and considerable rent rises will be unlikely due to the frugal budgets of tenants.

The fact that we saw a high proportion of tenants request rent reductions at the point of renewal in 2009 is in correlation with the tenants budgets. In fact early in 2009, nearly 30% of tenancies were renewing with a decrease in rent of at least 10%. However, by November, this had changed with 10% of tenancies achieving rent increases. At the end of 2009, the average rent increase stood at 4.5%.

Finally, for the investor in the UK lettings market, 2010 will be governed by borrowing ability. During 2009, even the professional investors with larger steadfast portfolios found it a challenge to acquire funding to further invest in the market. In addition to this, rising interest rates would have a considerable impact on the investor. During 2009, existing investors enjoyed low rates and a rise in rates in 2010 will undoubtedly have an impact on the rental market.

Any landlord taking a tenancy deposit will know that they have to protect the tenants deposit with one of the governments approved tenancy deposit schemes.

Two of the schemes involve a landlord or their letting agent having to pay a fee to the provider who then insure the deposit against potential loss and which allows the landlord or letting agent to retain the tenancy deposit.

It appears that because of the high number of cases going to arbitration. That is where the lanldord fail to agree on the return of the rental deposit one of the Tenancy Deposit Scheme providers The Dispute Service has had to increase their charges by 23%.

The other paid for provider of tenancy deposit services My Deposits has responded by stating that it is not going to raise it's charges! It's all getting very catty...

We say sod the lot of them. Why pay to hold on to your tenants deposit when the other custodial scheme the deposit protection scheme allows you to deposit it for free...zilch.

The other alternative for landlords is not to take a deposit at all and just ensure that you have a guarantor and charge an administration fee.

Wednesday, January 20, 2010

If any other landlords are like me at the moment they will be praying for the economy to stay in its current slump for a very long time.

We have interest rates resting nicely on the floor. I'm paying practically nothing for my buy-to-let mortgages which are all on tracker or variable rates. House prices are slowly coming down to levels which represent long-term value. I'm looking this week at two properties at auction which have guide prices that indicate that have a gross yield of 10%. In reality at sale and improvements this is likely to be closer to 8% than 10%. But this in my view starts to represent reasonable value particularly because both properties are in good areas.

The fly in the oitment is the potential for interest rates to rise and spoil the landlords party.Inflation jumped last month unexpectedly and is currently a full 0.9% above the Bank of England's target of 2%. Indeed another 0.1% and it would lead to one of those embarrassing open letters from the Bank of England Governor Mervyn King to the Chancellor explaining why he has been a naughty boy and missed his target. Does he get detention as well I wonder?

Will the spike in inflation lead to an early rate rise?

The concern for landlords is that the spike in inflation will lead to a sudden and dramatic rise in interest rates.

My view is that this is unlikely. Yes the rise was a shock and has caught out by a number of one off factors. However, the underlying strength of the economy and economic recovery is still weak. Most economists expect inflationary pressures to subside in the coming months. Interest rates will inevitably start to rise but some have predicted that this is unlikely before the election expected to take place in May. Unemployment is still rising and policy makers are concerned that they don't choke off the fledgling recovery before it has got underway. So rates will rise some time this year. But probably not dramatically. The chances are they are unlikely to climb above 1% this year and then above 2% next. The road to normality may thankfully be a slow one.....which is fine by me.

For more information on the future direction of interest rates check out the latest SWAP rates.

During the boom years in buy-to-let when landlords had an endless supply of buy-to-let mortgages from all the large national providers. Then the credit crunch and many of the large names disappeared from the buy-to-let mortgage market.

This has allowed many local building societies to come into their own. They continue to provide very attractive buy-to-let mortgages and rates for local landlords. So if you are looking for a good deal then 'check out' you local lenders too.

A couple of such local deals are provided by the Cambridge BS and the Loughborough BS.

The Cambridge for exmapmle has re-entered the buy-to-let market with a buy-to-let mortgage products including a 2 year fixed rate of 4.99% product and a variable rate of 3.99% for 2 years. Both are available up to 70% LTV and have a fee of 3.5% but are limited to landlords living in East Anglia.

The Loughborough has just launched a 5.99% 3 year fixed up to 70% LTV with a fee of £999. The buy-to-let loans are only available for restricted postcodes within the East Midlands.

Both products highlight the fact that local building societies continue to be a strong source of lending for landlords following the dramatic contraction in buy-to-let lending available in the market place.